Tag: Stock market

Gold slips as dollar steadies, U.S. stocks extend climb

Gold slips as dollar steadies, U.S. stocks extend climb

Gold slipped Monday, pressured by stock-market gains and overall global risk-taking seen after Friday’s U.S. jobs report eased concerns over accelerating inflation and faster U.S. interest-rate hikes.
April gold GCJ8, -0.12% fell $5.60, or 0.4%, to $1,318.40 an ounce.
Gold prices ended higher Friday, turning the metal’s weekly return just positive after a report revealed a strong rise in U.S. hiring but disappointing growth in wages.
The latest snapshot of the U.S. labor market showed strong job growth and a higher participation rate, with the nation adding 313,000 new jobs in February.
Rising inflation could add pressure on the Fed to speed up its rate rises, which could strangle the stock market.
Gold, in turn, although negatively affected by higher interest rates, could attract hedging demand against too-hot inflation.
Higher interest rates tend to be dollar-positive.
“I think the [U.S. dollar] could continue to recover this week.
That’s because in a relatively quiet week, the main indicator—in fact the main event—is going to be the release of the U.S. CPI for February on Tuesday,” said Marshall Gittler, chief strategist at ACLS Global.
As for other metals, May silver SIK8, -0.38% fell 11.3 cents, or 0.7%, to $16.495 an ounce.

The stock market will remain glued to the inflation story

The stock market will remain glued to the inflation story

Stifel Nicolaus chief economist Lindsey Piegza discusses the February jobs report and why she is concerned about wage growth.
In early February, the inflation narrative moved front and center on fears that rising wage pressures would feed broader price rises and force the Fed to tighten more aggressively than expected.
But on Friday, the February jobs report showed a robust 313,000 jobs created, but not much wage growth, sparking a relief rally that sent the market sharply higher.
Despite fears of significant increase in average hourly earnings given low levels of unemployment, wage growth has been weak throughout the recovery.
On Tuesday, investors will have a chance to react to the next chapter in the inflation story, the February consumer-price index. “For the moment, the jobs report eased concern that the Fed will be more aggressive. “Fear of a trade war and negative impact on economic growth have certainly eased and market participants are getting comfortable with Trump using tariffs as negotiating tactics,” said Browne.
Last week markets were pretty efficient to price in such a scenario, even though for now they are choosing not to focus on tariffs,” Sonders said. “The kind of price action we’ve had so far this year, including the 10% correction is better than a melt-up scenario.
Next week a flurry of economic releases may influence markets.

‘As good as it gets’: The stock market’s best-case scenario is playing out on Friday

‘As good as it gets’: The stock market’s best-case scenario is playing out on Friday

Wage growth in February was less than economists expected, a report from the Bureau of Labor Statistics showed Friday.
The market’s snap reaction shows just how seriously traders take data that could end up shaping the Federal Reserve’s monetary-tightening schedule.
Watch the market trade in real time here.
They were also most likely emboldened by the unemployment rate, which sat unchanged at 4.1%, the lowest since December 2000.
Major indexes wasted no time rising as futures contracts spiked following the 8:30 a.m.
Leading the way higher in the S&P 500 were financial, energy, and industrial stocks, with each sector boasting gains of more than 1.7% as of mid-day.
The report was, in many ways, the best-case scenario for US stocks.
Traders were clearly encouraged by the bullish combination of slower-than-expected wage growth and otherwise strong economic data.
The suppression of inflationary fears will now allow traders to focus on what has historically been the biggest driver of continued stock gains: earnings growth. “Inflation is normalizing but unlikely to see a dramatic uptick, and the Fed will continue to tighten policy but remain accommodative,” he said.

Turns out the ‘great inflation scare of 2018’ didn’t happen. Wages still not rising rapidly

Turns out the ‘great inflation scare of 2018’ didn’t happen. Wages still not rising rapidly

Remember the spike in wages in January that sparked a selloff in stock markets and sent U.S. interest rates surging?
Well, “the great inflation scare of 2018” apparently didn’t happen after all.
The 12-month increase in pay was marked down to 2.8% from 2.9%.
Put another way, the cost of labor is not rising rapidly and leading to higher inflation.
Wages are growing faster than the 2% rate that prevailed through much of the current eight-and-a-half-year old expansion.
What makes the restraint on wage growth surprising is that it’s taking place at a time when unemployment is extremely low and companies are hiring so rapidly that there’s widespread complaints of labor shortages.
The U.S. added a whopping 313,000 new jobs in February, for instance, to mark the biggest gain in a year and a half.
“Despite sizzling job growth in recent months, signs of an overheating labor market were just not there,” said chief economist Scott Anderson of Bank of the West after the February jobs report.
Yet if job creation carries on at its current torrid pace and the unemployment rate falls further, wage growth is virtually certain to speed up and top 3% for the first time since the Great Recession.
Companies won’t have any choice but to raise wages to bring in new workers and prevent experienced ones from leaving.

US bull market hits ninth birthday, 2nd longest since WWII

US bull market hits ninth birthday, 2nd longest since WWII

Happy ninth birthday, second longest U.S. bull market since World War II.
The stock market’s near decade-long climb upward since the depths of the Great Recession turns nine years old Friday.
On March 9, 2009, the S&P 500 hit a cycle low of 676.53, and now is up more than 300 percent since that date, according to Howard Silverblatt at S&P Global.
The stock market has had several corrections since March 9, 2009, which is when an index like the S&P 500 falls 10 percent or more from a recent high, most recently in February.
But the stock market has not fallen 20 percent or more from a recent high, which is when a bull market becomes a “bear” market.
The S&P 500 would have to fall roughly 600 points from its current level in order to enter a bear market.
If the current bull market lasts until August 21, it will be the longest bull market since World War II, exceeding the bull market that started October 1990 and lasted until March 2000.
During that time the S&P 500 rose more than 400 percent.
The third-longest bull market came in the post-WWII boom years, between 1949 and 1956.
While there are several risks to this current bull market, including the possibility of higher inflation and a trade war caused by President Donald Trump’s tariffs on aluminum and steel, most investors believe the current market isn’t at risk of falling into a bear market any time soon.

Trump says stock selloff a ‘big mistake’ because economy ‘great,’ but that’s exactly why investors are nervous

Trump says stock selloff a ‘big mistake’ because economy ‘great,’ but that’s exactly why investors are nervous

Jeffry Reuters President Trump has complained that a selloff in stock markets is a “big mistake” because all the news about the U.S. economy is “great,” but that’s exactly why investors are worried.
Faster wage growth is sometimes an omen of higher inflation.
Wall Street frets that higher inflation will force the Federal Reserve to jack up interest rates, making bonds TMUBMUSD10Y, +0.00% more attractive than stocks DJIA, -0.29% SPX, +0.51% and slowing the U.S. economy.
That’s why many investors were apparently anxious to reduce their stock portfolios.
“Hiring managers are not going to change their ways until it’s no longer working.
• The economy and labor market have become more global in scope, forcing Americans to compete with workers around the world.
• And many workers still scarred from the Great Recession are too anxious to move, switch jobs or ask for bigger raises.
He thinks hourly pay will grow 3% in 2018 for the first time since 2008.
While he acknowledged the wage gains last month may have been exaggerated, the “January employment report could be remembered as the point at which it become obvious that wages were finally accelerating meaningfully,” Stanley said.
If he’s right, the Fed is sure to raise interest rates three times as planned in 2018 and perhaps add a fourth increase.

6 Reasons For Another $6 Trillion Stock Market Correction

6 Reasons For Another $6 Trillion Stock Market Correction

The recent stock market correction shaved about $6 trillion off the market capitalization of equities worldwide, and a recent report from Bank of America Merrill Lynch (BAML) outlines six reasons why another plunge of similar magnitude is possible.
Six Negative Forces In this week’s edition of its The Flow Show report, BAML offers these six reasons why the S&P 500 may once again test its recent low on February 9: Investor optimism appears to be peaking, given very bullish readings on the firm’s Bull & Bear Indicator of investor sentiment.
Also, investors have been aggressively buying on the dips, inflows into equities were strong in the most recent week as measured by BAML, and asset allocations are still tilted toward stocks.
Also, high consumer confidence and low unemployment lead BAML to say “sell hubris & booms.”
Rather, the Federal Reserve and other central banks around the world are withdrawing monetary stimulus, hiking interest rates.
Protectionism is rearing its head, which is a negative for stocks.
Meanwhile, the recent pullback in the Bull & Bear Indicator from 8.1 to 7.6 may be a significant sell signal in itself.
Trade War Worries Bank of America Merrill Lynch is not alone in its concerns.
Others disagree, seeing indications of persistently strong economic growth.
Whether or not a recession is looming, historically high stock market valuations continue to be a source of worry, trade wars or not.

Here are 6 reasons why the stock market will likely retest its February lows

Here are 6 reasons why the stock market will likely retest its February lows

Getty Images The early February stock market correction wiped $6 trillion off the global market capitalization before equities reclaimed a chunk of lost ground.
A $6 trillion drop in global market cap would imply a test of 2,534 for the S&P 500 SPX, +0.51% they said in a Thursday note.
The benchmark index was little changed at 2,678 on Friday, bouncing back from an earlier decline inspired by trade jitters but on track for a 2.5% weekly decline.
The analysts cited positioning, profits, policy, protectionism, price action and pain as the reasons for investors to be cautious about.
Investors are still very bullish, judging by their equity positioning, they said.
Investors conditioned by years of success for the “buy the dip” strategy, poured $17.7bn into equities last week.
Meanwhile, technology, financials and emerging market debt and equity fund remained as crowded as ever, they said.
BAML analysts indicated that profits of U.S. corporation have peaked, while consumer confidence and manufacturing activity are booming amid low unemployment rate.
Global central banks “have played ‘whatever it takes’ card, by year-end Fed will have hiked 9 times, fiscal card played aggressively…no more stimulus to discount,” the note said.
Home builders are making new lows and global stocks are not outperforming global government bonds.

Stock Market Woes: The Recovery Eats Its Children

Stock Market Woes: The Recovery Eats Its Children

A common complaint among those whose sympathies lie more with Main Street than Wall Street is that the “recovery” since the financial crisis has benefited investors far more than workers.
Since the S&P 500 bottomed out in March 2009, the index has more than tripled in value; average hourly earnings, by contrast, have grown by just over 20%.
Apples and oranges, you may rightly object, but the market apparently saw a connection between the two measures when, on Friday, Feb. 2, the Bureau of Labor Statistics reported a 2.9% rise in average hourly earnings in the 12 months to January, the largest increase since 2009: the S&P closed down 2.1% on the day, then lost another 4.1% the following Monday (the steepest single-day fall since 2011).
The unemployment rate has been at or below 5% since late 2015, and the Fed funds rate, even after five hikes, is at the low end of its historical range.
Combine that with the Fed’s three expected hikes in 2018 (according to December’s projections), and the result is higher short- and long-term rates.
Rising bond yields make stocks look risky and their dividends less attractive.
(See also, The Bond Market Is Trying to Warn Us of Trouble.)
The money workers save in taxes – for a time – only adds to those wage rises, potentially stoking inflation.
Low inflation was evidence that workers who had left the labor force were still on the sidelines, which in turn kept wages low.
Then again, recent events recall the Big Rotation that Bank of America Merrill Lynch predicted shortly before the 2016 election: a Trump victory, a shift from deflationary to inflationary pressures, an end to central bank “omnipotence,” an embrace of deficits, a Main Street advantage over Wall Street.

MARKET SNAPSHOT: Stock-market Investors Aren’t Afraid Of The Fed Anymore

MARKET SNAPSHOT: Stock-market Investors Aren’t Afraid Of The Fed Anymore

Fed policy is still reasonably accommodative and investors are not paying too much attention to rate hikes at this stage,” said Jack Ablin, chief investment officer at BMO Private Bank.
Meanwhile, the Fed’s so-called dot plot suggests policy makers are planning to deliver four rate hikes by the end of next year.
Which is why I expect that as long as the economy looks likely to drive unemployment rate lower, the Fed will remain biased toward hiking rates,” Duy wrote. “The market tends to underestimate reality, but it’s OK because there is plenty of time for the market to adjust expectations.
But the main point is that the Fed is not moving markets any more,” said Ablin.
The November employment report released Friday showed that the U.S. economy added 228,000 jobs (http://www.marketwatch.com/story/us-gains-228000-new-jobs-in-november-in-another-strong-show-of-hiring-2017-12-08), while the unemployment rate was unchanged at 4.1%.
And when policy and earnings are all baked in, there is a higher risk from surprises that jolt the market,” Williams said.
The November producer-price index is due on Tuesday, while the consumer prices index is set for release on Wednesday.
The Fed’s two-day policy meeting will end on Wednesday, with the announcement of its policy decision at 2 p.m. Eastern.
The announcement will be followed by Yellen’s last news conference as Fed chief.